Qualified Tuition Program (also known as Section 529 plans) - Program run by a state, state agency or education institution that allows for prepayment of qualified education expenses or contributions to a tax-free account for education savings. Earnings are tax free. Comes in two varieties: the college savings plan and the prepaid tuition program.

Prepaid tuition plan - parent or other account owner contributes cash for beneficiary and the contribution purchases tuition credits at current tuition rates.

College savings plan - parent or other account owner contributes on behalf of beneficiary with contributions invested according to the term's investment options.

Contributions are not deductible.

Tax-free distributions for qualified expenses.

Applies to tuition, fees, books, supplies, equipment, room and board if at least a half-time student and expenses for special needs services.

Covers undergraduate and graduate education.

Qualifies for $14,000 annual gift tax exclusion for 2013.

Contributor may prorate contribution over five years for purposes of claiming gift tax exclusion. Allows for one-time contribution of $70,000 ($14,000 per year times five years) for a single beneficiary.

Income phaseouts for contributions: $95,000 to $110,000 (single); $190,000 to $220,000 (joint returns).

Custodial Accounts - An account created at a bank, brokerage firm or mutual fund company that is managed by an adult for a minor that is under the age of 18 to 21 (depending on state legislation).

UTMA and UGMA allow parents and other family members to transfer assets to a minor without setting up a special trust. The donor appoints a custodian or trustee to look after the account. The donor can appoint him/herself to be custodian.

Transfers to UTMA or UGMA accounts qualify for the annual gift tax exclusion.

At one time, UTMA and UGMA accounts were popular vehicles for college savings, but they have declined with the emergence of 529 plans.

Child gains full control of the account at the age of majority, usually 18 or 21, depending on the state.

UGMA accounts, which came first, are restricted to holding cash or securities.

UTMA accounts, in addition to cash and securities, may also hold other property, including real estate, art, patents and royalties.

Assets held in an UTMA or UGMA account may hurt a student's chances of qualifying financial aid since a greater portion of a child's assets are expected to be allocated to education costs than a parent's.

Expansion of "kiddie tax" to those up to age 18 expected to diminish further popularity of UTMA and UGMA accounts for college savings.

Savings bonds- Interest earned on savings bonds used to cover qualified education expenses is not subject to tax.

There are several types of savings accounts designed for higher education available today. The right one for you will depend upon factors such as your tax bracket, time horizon, investment objectives ...